Author Topic: How to do a backdoor Roth conversion in my situation  (Read 1430 times)

babytuckoo

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How to do a backdoor Roth conversion in my situation
« on: June 12, 2016, 03:44:15 PM »
Hello forum,

Iíve been reading the forum recently trying to prepare ourselves (wife and I) for a backdoor Roth conversion in the future.  Iím not sure I quite get it and would like some advice on our specific situation since we have accounts based with old employers and have started new jobs in a new city.

My wife has 211K sitting in a 403b plan from her previous academic job. It is based at TIAA-CREF and is in a target date plan and overall has a pretty good expense ratio (0.2%) Her current new employer is a start up and does not have an employee sponsored retirement plan. We plan to contribute $5500 into an IRA for her this year.  Our new combined income of 280K makes a Roth and deductions on a standard IRA not possible.

I have 120K sitting in vanguard index funds in an IRA (rolled over from prior employers) and 45K in my most recent employer sponsored Roth 401(k) (this was contributed after tax.)

I will be accepting a new federal position and will now have access to a TSP plan. So my questions are:

-What do I with my Roth 401(k)? I assume I canít roll it over to the TSP since the contributions were made after tax.

-Do we keep my wife's old 403(b) at TIAA-CREF since the new employer does not have a retirement plan? We will contribute $5500 into an IRA for her, but if we rollover the 403(b) into an IRA, will that prevent us from doing a backdoor Roth in the future?  Can we do a backdoor Roth from an IRA or does the money need to be in an employer sponsored plan? Not sure I understand this.

-We just sold our house and received a check for 130K that I plan to put in index funds with our Vanguard taxable account. We are renting in the new city and don't plan on buying. We will use the taxable account to start living off when we reach FI (plan for 6-7 years).  When we no longer work, I assume we will start the backdoor Roth conversions?

Thanks ahead of time for any and all advice! 

MDM

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Re: How to do a backdoor Roth conversion in my situation
« Reply #1 on: June 12, 2016, 03:54:15 PM »
-What do I with my Roth 401(k)? I assume I canít roll it over to the TSP since the contributions were made after tax.
For a Roth 401k rollover into TSP, see https://www.tsp.gov/PDF/formspubs/tsp-60-r.pdf

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-Do we keep my wife's old 403(b) at TIAA-CREF since the new employer does not have a retirement plan? We will contribute $5500 into an IRA for her, but if we rollover the 403(b) into an IRA, will that prevent us from doing a backdoor Roth in the future?  Can we do a backdoor Roth from an IRA or does the money need to be in an employer sponsored plan? Not sure I understand this.
Keep the money in TIAA.  See  https://www.bogleheads.org/wiki/Backdoor_Roth_IRA.

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When we no longer work, I assume we will start the backdoor Roth conversions?
Why wait?

babytuckoo

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Re: How to do a backdoor Roth conversion in my situation
« Reply #2 on: June 12, 2016, 04:16:54 PM »
 MDM, thanks for the helpful info and links. So it sounds like TSP will keep my Roth 401k rollover separate in that it is post tax and should not incur any additional future tax.

Perhaps I should have clarified.  If we make a nondeductible IRA contribution of $5500, then it could immediately be rolled over into a Roth IRA.

However, for the funds that are currently sitting in the 403b, we will keep them at TIAA-CREF and after we stop working (and income drops), then do we roll them over to and IRA, pay deferred taxes and then roll them into a Roth? 

Thanks

MDM

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Re: How to do a backdoor Roth conversion in my situation
« Reply #3 on: June 12, 2016, 04:23:28 PM »
However, for the funds that are currently sitting in the 403b, we will keep them at TIAA-CREF and after we stop working (and income drops), then do we roll them over to an IRA
Yes to this point.

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pay deferred taxes and then roll them into a Roth?
Probably semantics but just in case: if you have a lower income at this time, it can make sense to convert some portion of the tIRA to a Roth.  You will owe whatever taxes on the converted amount.  See http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/ for more.

Good luck!